AI-Powered Global Expansion: The Impact of Artificial Intelligence Adoption on Firms’ Outward Foreign Direct Investment

Against the backdrop of profound shifts in the global economic landscape and rapid advances in digital technologies, artificial intelligence (AI) offers firms new opportunities to expand into international markets and improve the allocation of resources across borders. Drawing on a sample of Chinese A-share listed firms from 2009 to 2024, this study empirically examines the relationship between AI adoption and outward foreign direct investment (OFDI), with particular attention to the mechanisms underlying this relationship. The findings indicate that AI adoption is positively and significantly associated with firms’ OFDI activities. This result remains robust across a range of alternative specifications, including different measures of AI adoption, adjustments to fixed effects and standard-error clustering, and the exclusion of selected observations. Heterogeneity analyses suggest that the positive relationship is more pronounced among technology-intensive firms and larger enterprises. Further analysis identifies two potential channels through which AI adoption may facilitate OFDI: technological innovation and the alleviation of financial constraints. Together, these mechanisms may strengthen firms’ technological capabilities and improve their access to the financial resources required for international expansion. By examining OFDI through the lens of firm-level AI adoption, this study extends the literature on the determinants of international investment and provides further insight into how AI may shape firms’ internationalization strategies. The findings also offer empirical evidence relevant to the integration of AI into the real economy, the enhancement of firms’ international competitiveness, and China’s efforts to pursue higher-standard economic opening-up.